Is a Reverse Mortgage Loan Right for Me?
If you’re over the age of 62, a Reverse Mortgage may be a sound financial option for you to consider. A reverse mortgage can provide supplemental income for individuals who have significant equity in their homes and can be a path to financial security for those who feel they haven’t sufficiently saved for retirement, all while maintaining home ownership. And unlike a Home Equity Line of Credit, a reverse mortgages line of credit is guaranteed and can never be reduced.
Popularity of Reverse Mortgage
CBS Money Watch reports that in its program’s inaugural year of 1990, 157 reverse mortgages were recorded. The program quickly gained popularity and 2009 brought in a record 114,692 reverse mortgages. Despite a decline during the Great Recession, the number of reverse mortgages has since continued to climb and by 2016, consumers have collectively taken out over 1,000,000 reverse mortgage loans.
Since the Great Recession, stricter regulations have been implemented to protect both lenders and borrowers, so although this can be a complex and lengthier process than a traditional loan, if the circumstances are right the benefits of a reverse mortgage can be rewarding.
Benefits of Reverse Mortgage
Reverse mortgages have become the new retirement plans
If you have been responsible with your mortgage payments and increasing your equity in your home, cashing out on the equity can be a great retirement solution. Many people have used a reverse mortgage to pay for unexpected expenses such as medical bills, debt consolidation, or to create additional income. This type of refinance is also a popular retirement supplement.
You can never owe more than the value of your home, regardless of how much you borrow
If you’re concerned about taking on more financial liability, a reverse mortgage may be a great option for you in that you will not be in more debt than when you originally began.
You can add a borrower who was not on the original loan
For example, if your original loan was executed without your spouse listed as a co-signer, this can present complications if you were to pass and your spouse may not be able to remain living in the home or receive income from your mortgage.
You can remove a borrower who was on the original loan
You can remove a borrower if your situation has changed since your original mortgage. This can alleviate headaches associated with your heir of your home later.
Questions to Consider Before You Refinance
What do you need the cash for?
Do you need to pay off a medical bill or property taxes? Regardless of the reason for the expense, you will want to consider all of your financial options first before pursuing a reverse mortgage. Determining your reason for the cash will help you your decision-making process.
How much equity do you really have?
Utilize our reverse mortgage calculator to determine if the cost benefits work out in your favor. This will help you gain a better idea of whether you have enough equity to dip into as well as calculate the total cost over time. Factors that will influence your loan amount include your age, the value of your home, and interest rates.
Do you have enough saved to pay all the fees?
As with any loan origination, there are fees and costs associated with the process. Be sure that you have enough money set aside for the fees, and compare the costs and interest rates to see if a reverse mortgage is a good option for you. Also, be sure you understand the Total Annual Loan Cost (TALC) to account for your cost over time.
Have all property taxes and homeowners’ insurance been paid?
As with a traditional mortgage, you are required to pay all property taxes and homeowners’ insurance. Ensure that you maintain these important dues and continuing paying them as part of the requirements of the loan.
Do you plan to move?
This is an important question to ask yourself. Reverse mortgages are ideal for individuals who plan to stay in their homes for a long period of time. They are also ideal for those who want to leave the property to their family after death.
Make sure you meet all the criteria
You must be 62 years old or older.
You must either own your home outright or have a significant amount of equity in your home.
This home must be your main residence. In certain situations, consultation with a no or low cost Home Equity Conversion Mortgage (HECM) counselor may be required so that they may guide you through the process. More specific questions can be answered through the U.S. Department of Housing and Development (HUD).
Reverse mortgage can be a great option for those who have been responsible with their initial mortgages and home ownership.
They provide a relatively safe opportunity to get cash but as with any big financial decision, borrowers should first consult a professional financial advisor.
If you feel that a reverse mortgage is the right decision for you, please fill out this form and we’ll be happy to follow up with you!
Fair Lending Statement
Capstone Direct is an Equal Housing Lender.
We are committed to fair and responsible lending in offering competitive home financing opportunities to consumers. It is our policy to treat all consumers fairly and in compliance with all applicable lending laws.
Capstone Direct does not discriminate against any applicant or customer on the basis of race, color, sex, sexual orientation, gender identity, religion, disability, age, veteran status, ancestry, or national or ethnic origin. Further, we do not discriminate against any applicant or customer on the basis that all or part of the applicant’s or customer’s income derives from any public assistance program, or on the basis that the applicant or customer has in good faith exercised any right under any applicable law whose purpose is the protection of consumers.
Capstone Direct fully complies with all laws applicable to the conduct of its business, including those laws prohibiting discrimination such as the Fair Housing Act and the Equal Credit Opportunity Act and is committed to fostering an environment supportive of diversity.